Where is China Growing?

May 28, 2015

By Benjamin Herst

Want to understand China’s economic growth these days? The key might lie beyond China’s headline-grabbing megacities. In fact, it is China’s medium-sized cities that are leading the country’s economic growth, according to a new report on China’s urbanization drive. The data, taken from China’s National Bureau of Statistics and compiled by the Organization for Economic Cooperation and Development (OECD), show that cities of 1.5-5 million people have the highest GDP per capita growth rates in the country. While growth rates for China’s megacities are still quite dynamic, they tend to absorb most of China’s migrant workers, who are typically less productive—in GDP terms—than existing residents, according to the report. Medium-sized cities do absorb migrant workers, of course, just not at the same rates as do megacities. Going forward, however, the quality of China’s urban development will become increasingly important for sustaining economic growth. There is evidence that when countries cross the 50% urbanization threshold, as China did in 2011, urbanization becomes less of an automatic growth engine. In these countries, according to the OECD report, economic growth is sustained only when urbanization processes are managed properly. For China, this will depend on the success of its fundamental economic transformation toward an economy driven by domestic consumption.